# Plot the Business' Information then Answer the Following Questions

Mar 5th, 2014
Anonymous
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Question description

11. Table 9.9 illustrates the revenue conditions facing ABC, Inc., and XYZ, Inc., which operate as competitors in the U.S calculator market. Each firm realizes constant long term costs (MC=AC) of \$4 per unit. On graph paper, plot the enterprise demand, marginal revenue, and MC=AC schedules. On the basis of this information, answer the following questions.

a.  With ABC and XYZ behaving as competitors, the equilibrium price is \$____ and output is ___. At the equilibrium price, US households attain \$ ___ of consumer surplus, while company profits total \$___.

b.  Suppose the two organizations jointly form a new one, JV, Inc., whose calculators replace the output sold by the parents companies in the US market. Assuming that JV operates as monopoly and that its costs (MC=AC), equal \$4 per unit, the company’s output would be ___ at a price of \$ ___, and total profit would eb \$ ___. Compared to the market equilibrium position achieved by ABC and XYZ as competitors, JV as a monopoly leads to a deadweight loss of consumer surplus equal to \$___.

c.  Assume now that the formation of JV yields technological advances that result in a per unit cost only \$2; sketch the new MC=AC schedule in the figure. Realizing that JV results in a deadweight loss of consumer surplus, as described in part b, the net effect of formation of JV on US welfare is a gain/loss of \$___. If JV’s cost reduction was due to the wage concessions of JV’s US  employees, the net welfare gain/loss for the US would equal \$___. If JV’s cost reductions resulted from changes in work rules leading to higher worker productivity, the net welfare gain/loss for the US would equal \$___.

12. Table 9.10 illustrates the hypothetical demand and supply schedules of labor in the US. Assume that labor and capital are the only two factors of production. On graph paper, plot these schedules.

a. Without immigration, suppose the labor force in the US is denoted by schedule S₀. The equilibrium wage rate is \$___; payments to native US workers total \$__ while payments to US capital owners equal \$___.

b. Suppose immigration from Hong Kong results in an overall increase in the US labor force to S₁. Wages would rise/fall to \$___, and payments to Hong Kong immigrants would total in \$___. US owners of capital would receive payments of \$___.

c. Which S factor of production would gain from expanded immigration? Which US facto of production would likely to resist policies permitting Hong Kong workers to freely migrate to the US?

Table 9.9

 Quantity Price (\$) Marginal Revenue (\$) 0 9 - 1 8 8 2 7 6 3 6 4 4 5 2 5 4 0 6 3 -2 7 2 -4

Table 9.10

 Wage (\$) Quantity Demanded Quantity Supplied₀ Quantity Supplied₁ 8 0 2 4 6 2 2 4 4 4 2 4 2 6 2 4 0 8 2 4

Ch.14: 10 (a-c)

10. Assume the United States exports 1000 computers at a price of \$3,000 each and imports 150 UK autos at a price of £ 10,000 each. Assume that the dollar/pound exchange rate is \$2 per pound.

a. Calculate, in dollar terms, the U.S export receipts, import payments, and trade balance prior to a depreciation of the dollar’s exchange value.

b. Suppose the dollar’s exchange value depreciates by 10%. Assuming that the price elasticity of demand for the U.S exports equals 3.0 and the price elasticity of the demand for U.S imports equals 2.0, does the dollar depreciation improve or worsen the U.S trade balance? Why?

c. Now assume that the price elasticity of demand for U.S exports equals 0.3 and the price elasticity of demand for U.S imports equals 0.2. Does this change the outcome? Why?

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